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The politics of progressive income taxation with incentive effects

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  • DE DONDER, Philippe
  • HINDRIKS, Jean

Abstract

This paper studies majority voting over non-linear income taxes when individuals respnd to taxation by substituting untaxable leisure to taxable labor. We first show that voting cycles over progressive and regressive taxes is inevitable. We then investigate three solution to this cycling problem: (i)rducing the policy space to the policies that are ideal for some voter; (ii) weakening the voting equilibrium concept; (iii) assuming parties also care about the size of their majority.
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Suggested Citation

  • DE DONDER, Philippe & HINDRIKS, Jean, 2003. "The politics of progressive income taxation with incentive effects," CORE Discussion Papers RP 1673, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1673 Note: In : Journal of Public Economics, 87, 2491-2505, 2003
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    References listed on IDEAS

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    1. Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June.
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    10. De Donder, Philippe & Le Breton, Michel & Truchon, Michel, 1998. "Choosing from a Weighted Tournament," Cahiers de recherche 9815, Université Laval - Département d'économique.
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    16. De Donder, Philippe & Le Breton, Michel & Truchon, Michel, 2000. "Choosing from a weighted tournament1," Mathematical Social Sciences, Elsevier, vol. 40(1), pages 85-109, July.
    17. De Donder, Philippe & Hindriks, Jean, 1998. "The Political Economy of Targeting," Public Choice, Springer, vol. 95(1-2), pages 177-200, April.
    18. David Epstein, 1997. "Uncovering some subtleties of the uncovered set: Social choice theory and distributive politics," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(1), pages 81-93.
    19. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    20. Laslier, Jean-Francois & Trannoy, Alain & Van Der Straeten, Karine, 2003. "Voting under ignorance of job skills of unemployed: the overtaxation bias," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 595-626, March.
    21. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
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    Citations

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    Cited by:

    1. Hindriks, Jean, 2001. "Is there a demand for income tax progressivity?," Economics Letters, Elsevier, vol. 73(1), pages 43-50, October.
    2. Georges Casamatta & Helmuth Cremer & Philippe De Donder, 2010. "Repeated electoral competition over nonlinear income tax schedules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 35(4), pages 535-574, October.
    3. Rafael Salas & Juan Gabriel Rodríguez, 2010. "Popular support for egalitarian social welfare," Working Papers 171, ECINEQ, Society for the Study of Economic Inequality.
    4. Philippe De Donder & Jean Hindriks, 2004. "Majority Support for Progressive Income Taxation with Corner Preferences," Public Choice, Springer, pages 437-449.
    5. Felix J. Bierbrauer & Pierre C. Boyer, 2016. "Efficiency, Welfare, and Political Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 461-518.
    6. Brett, Craig & Weymark, John A., 2016. "Voting over selfishly optimal nonlinear income tax schedules with a minimum-utility constraint," Journal of Mathematical Economics, Elsevier, pages 18-31.
    7. Carbonell-Nicolau Oriol, 2009. "A Positive Theory of Income Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, pages 1-49.
    8. John Roemer, 2012. "The political economy of income taxation under asymmetric information: the two-type case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(1), pages 181-199, March.
    9. Soumyanetra Munshi, 2011. "On existence of pure strategy equilibrium with endogenous income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(1), pages 1-37, June.
    10. Jenny de Freitas, 2009. "A probabilistic voting model of progressive taxation with incentive effects," Hacienda Pública Española, IEF, pages 9-26.
    11. Klor, Esteban F., 2006. "A positive model of overlapping income taxation in a federation of states," Journal of Public Economics, Elsevier, pages 703-723.
    12. repec:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-016-0996-6 is not listed on IDEAS
    13. Rafael Salas & Juan Rodríguez, 2013. "Popular support for social evaluation functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(4), pages 985-1014, April.
    14. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo Group Munich.
    15. Brett, Craig & Weymark, John A., 2017. "Voting over selfishly optimal nonlinear income tax schedules," Games and Economic Behavior, Elsevier, vol. 101(C), pages 172-188.
    16. Bierbrauer, Felix J. & Boyer, Pierre C., 2013. "Political competition and Mirrleesian income taxation: A first pass," Journal of Public Economics, Elsevier, pages 1-14.
    17. Craig Brett & John A Weymark, 2014. "Citizen Candidates and Voting Over Incentive-Compatible Nonlinear Income Tax Schedules," Vanderbilt University Department of Economics Working Papers 14-00010, Vanderbilt University Department of Economics.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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